Ocularly Blinding Cuts – Mr Magoo heads up finance at social landlords

Reader, my head is bruised battered and cut and its costing me a fortune in bricklayers and plasterers at home.  Do you want a wall knocking through at home by any chance?  Give me a call point me directly at the wall in question and shout OBC as I have a tendency to do a Woody Woodpecker impersonation!  I am even thinking of changing my name to Isaiah as I appear to be the lone voice crying in the wilderness about the OBC while social landlords are not preparing the way for it and simply telling tenants figuratively (though shortly literally?) to pick up thy bed and walk by concentrating on the bedroom tax.

The OBC will affect 3 times more than anticipated according to latest DWP estimate, it will pitch social landlord against social landlord, its crudeness will affect large families instantly in the fundamental flaw, it will affect smaller and smaller families with the systemic flaw which will destroy social housing , it will possibly make 130,000 families homeless next year, more the year after and I could go on and on ranting that it is (a) the biggest and most insidious of all the welfare reforms  especially (b) that compared to the bedroom tax social landlords refuse to see the risk to them.

So it’s time to put some figures to it so that even if social landlords have Mr Magoo as their Finance Director they can see the issues and the brief discussion below reveals those issues are a massive risk to arrears far far greater than anything the bedroom tax gives.

The DWP figures in the final estimate of July 2012 was 56000 families at an average reduction of £93pw and of these 44%, or 24,640 were tenants in social housing.  The revised figures given last week sees 171,000 affected in the first year (2013/14) a threefold increase is bad enough yet it also said this increases by 8,538 per calendar month or an additional 102,456 families per year.

If we then equate reduction in HB with the risk to arrears we see that in its first year 171,000 lots of £93 per week will be saved in HB a total of £830m.  44% of this is in social housing meaning a reduction in HB there of £365m in Year 1.  The DWP estimate the bedroom tax will save £480m in Year 1 and £500m in Year 2.

In Year 2 the OBC will affect 273,456 people and lets keep the £93pw figure which gives a HB saving of £1.33bn of which 44% is £585m.  So in the first two years the OBC will reduce HB by £950m in social housing and the bedroom tax £980m.

Year 3 lets assume bedroom tax follows same trend and goes to £520m (although it should be reducing with downsizing and better use of stock) making a HB saving / risk to arrears of £1.5bn.  In Year 3 the OBC will affect 375912 people and again lets keep that average at £93 to make a £1.82bn saving of which 44% is £800m.

The OBC 3 year figure now becomes £1.75bn or £250m MORE than the 3 year bedroom tax one.

By the following year that increases to £730m more than the bedroom tax and the year after to £1.45bn MORE than the bedroom tax to social housing.

In 7 years time using DWP projections there will be 888,000 or so families affected.  At £93pw average reduction and keeping this constant and not allowing for any inflation and not considering the impact of affordable rent which makes this higher and not factoring in the systemic flaw which sees the cap fall in real terms we see this gives a reduction in that year alone of £4.31bn of which 44% is £1.9bn to social landlords.

The aggregate of these 7 years becomes £20.56bn of which 44% will be in social housing amounts to £9.05bn.  So we see the OBC having a £9.05bn risk to arrears while the bedroom tax holds at most a £4bn risk to arrears in this time.

Why social landlords deny the impact of the OBC and focus on the bedroom tax I don’t know.  I do know they ignore its impact at their peril.  Why today JRF focuses upon the (undoubted) link between Universal Credit and poverty when the OBC will cause a much greater threat to tenant poverty I also don’t know.  It seems this elephant in the room is that big we cant see it!  Even if the average OBC cut remains at its inception level of £93pw that is far more than the bedroom tax or any cut UC will produce!

That is a £4.852 per year cut and will impact massively on poverty and especially on rent arrears as families will feed and clothe their families before paying rent.  Many of the readers of this will not be in that situation and working yet how would you feel about a £93pw cut?  How would you manage?

I can’t answer the question as to why social landlords and organisations such as JRF are ignoring this level of cut and its impact. All I know is they shouldnt ignore it – and especially as it becomes worse each year and captures more and more families each year.  That huge grey elephant has swallowed a ticking time-bomb and especially for rented housing as the only benefit to be cut is HB.

The OBC will create a schism in social housing pitching LA against HA

The overall benefit cap (OBC) will create massive and divisive tension between councils and housing associations and the OBC is an unwitting divide and conquer strategy by the coalition for social landlords.

I have touched on this lightly before but in light of an article in Inside Housing today in which Birmingham City Council dumped a problem case on a housing association needs further consideration. BCC in short dumped a problem tenant on a HA without informing them of that tenants previous anti social behaviour record.

The basic issue

The OBC which begins in April 2013 sets an overall benefit cap of £500pw for families.  It works by deducting the level of welfare benefits and tax credits from the cap and what is left, the residual, becomes the maximum that can be paid towards rent through Housing Benefit (HB and LHA).  When that residual doesn’t cover the rent level then the tenant will build up arrears which leads to eviction and then to homelessness and a duty of temporary accommodation (TA) on councils.

Note that as the OBC will cap families then because children are involved local councils have little option but to deem the family unintentionally homeless and in priority need and have (a) a full homeless duty to accommodate in TA and then (b) the council has to find permanent accommodation to discharge that duty.

It is the second stage issue (b) above, the sourcing of permanent accommodation, that will reveal the tension and this is a systemic tension directly created by the OBC.  That tension is that the larger-sized families that have been through this cap to arrears to eviction to homelessness route will still not get enough in HB to pay for social rent levels and so the process starts again of arrears build-up to eventual return to TA.

The DWP issued a final estimate in July 2012 saying that 56,000 families will be caught by the OBC and 44% of these would be in social housing (SRS) and 56% in private rented housing (PRS).  Yet last week and just 3 months after this final estimate from July the DWP released a new estimate which sees the figure increase threefold to 171,000 families in 2013/14 leading to 3 times the arrears risk.  So we will see local councils have much higher numbers of homeless presentations and the same councils housing so many more families in TA and then seeking to find much more permanent housing in the SRS to discharge the full homeless duty.

In summary the OBC systemically and directly creates a huge increase in homeless cases and a correspondingly huge increase in local councils needs for discharging such families into the social rented sector.

Because of stock transfer over the last 20 years we know that two-thirds of the SRS are registered providers – RPs such as housing associations, ALMOs and all other stock transferred organisations (STOs). Typically, these RPs are ‘duty-bound’ to help councils with their housing and homeless needs and do so by way of nomination agreements.  Councils may have nomination rights for 50%, 80% or even 100% of all HA lettings.  Yet because many of these families will NOT get enough HB to cover the RP rent these families become a huge risk of arrears and a huge risk to RP’s bottom lines.  Throw in the context of the bedroom tax and direct payment of HB to tenant and not landlord and that risk increases and puts such risks in the correct context.

RPs are by necessity, going to become more risk-averse in who they allocate properties to at the same time that councils will have a hugely increased need to offload high risk cases to RPs and the systemic tension emerges.

The OBC is a crude cap and will capture two-parent two-child families in London living in the PRS and two-parent four-child families living in the SRS.  In the provinces this becomes two-parent three-child families in the PRS and two-parent 4 and 5-child families living in the SRS.  All such families will have such a high risk of arrears that they will be evicted and become homeless and enter into TA.

So we see a situation in which councils will have families in TA that they will want to move into housing association properties BUT the HAs will know these families won’t get anything like full HB (and some will get no HB) meaning the HA will have to accept a huge risk of financial loss.  We will see, as now, central government pressurising local authorities (LAs) not to have homeless families in temporary B&B hotels for more than six weeks, LAs in turn pressurising HAs to accommodate these high risk of arrears families and HAs saying to LAs no chance, or in the vernacular go f##k yourself!

Nomination agreements will become huge sources of tension as LAs seek to ‘dump’ high arrears risk cases onto RPs.  Central government no doubt through the LGA will be pressurising RPs to take such cases, yet let’s not forget that RPs as they are known are correctly termed PRPs or private registered providers and there is no legal duty on them to accept such cases they are merely ‘duty-bound’ – a term of no legal substance whatsoever – to help LAs with their housing and homeless strategies.

Look a bit deeper and we see ALMOs and those LAs with retained stock will have little choice but to accept these high arrears risk cases from LAs. Yet the traditional housing associations will be able to say no to their LAs and will renegotiate nomination agreements and will be more circumspect and risk averse on who they accommodate by this referral route.  Divisions will undoubtedly open up between HAs and LAs over this issue, which again I restate is a systemic issue created directly by the OBC and its inherent crudeness.

HAs may in fact like this idea.  If you accept the idea (that some hold) that all social housing is the housing of last resort and the reside of the benefit scrounger, then the traditional HAs can move away from that notion and in business terms this makes sense.  The affordable (sic) rent model needs to be seen in this context too as HAs develop AR but councils don’t! HAs becoming one step above the lowest of the low and creating a gulf between them and council housing and ALMOs which will become the preserve of the benefit claiming large sized family.

A schism will appear within social housing and become the divide and conquer strategy of the coalition.

Will LAs start to bring ALMO’s back in-house too out of necessity as this is the only way they can discharge their high-cost full homeless duty?  Possibly yes.  That’s an interesting and perhaps unintended consequence of the OBC and reversing the trend of LAs getting rid of council housing which has been the norm over the last twenty years.

Again I restate (bang on or rant?) about the systemic flaw in the OBC which will see more and more smaller sized families getting caught by the cap as the cap fails to keep pace with the rise in welfare benefit inflation and especially with rent inflation.  Again I rant (?) about the OBC being far and away the most important and most dangerous of all the welfare ‘reforms’ that will affect social housing.

Yet none of the above is disingenuous in any way and the OBC will change the face of social housing in the UK and will do more to change it than the bedroom tax of direct HB payment to tenant or any of the other ‘reforms.’  It really is time that social landlords and the social housing sector (or is it a movement?) does wake up and smell the bloody coffee.

Social landlord arrears 3 times worse than planned for

Last week I posted that DWP has increased the estimate of the number of tenants affected by the overall benefit cap threefold from 56,000 in its final (sic) estimate of July 2012 to 171,000 by the end of the next financial year at March 2014.

Today we see a report in Inside Housing which says social landlords have massively increased their provision for bad debts (ie arrears) next year.

Yet these social landlord figures were decided and based upon the old DWP estimates of those to be capped by the OBC and so are a massive underestimate of arrears risk.

In summary the expected arrears social landlords will face next year are far higher and the provision for bad debt provision will need to be sharply revised upwards

It’s also time for social landlords to wake up and smell the coffee as I have been warning that the OBC is the biggest welfare reform danger to social housing and far worse than the bedroom tax which is still erroneously getting all the attention.

As I said last week:

For social landlords who thought that only 25,760 social tenants would be hit (46% of the 56000) it is now 53,460 tenants (by September 13) – more than double and rising by 4217 per month to make over 78,500 by March 2014 – or triple the estimate of just 3 months ago.

3 times the number of social tenants will be hit next year by the OBC than the DWP said just 3 months ago! 

 

Councils to regulate PRS landlords before discharging main homeless duty

An Ombudsman report released today is making the rounds in the housing and local government media today and being presented as an overcrowding issue.  It is an overcrowding issue BUT it contains much more important issues that will impact on homelessness duties.

Councils will have to regulate PRS landlords before discharging main homeless duty

The Ombudsman report deserves wider reading and especially its Conclusions which state:

28. When Mr Green and his family moved into their property their household was 3.5 people in terms of sections 324 -326 Housing Act 1985. But, given the size of the second bedroom, the house was overcrowded by .5 of a person from the moment they moved in. 

29. Regardless of whether Mr Green received the letter of 7 May 2010 which told him of his right of review, it was maladministration for the Council to have offered Mr Green the property at all as it was not big enough for his needs.  I expect the Council to be aware of the law in this respect and carry out basic checks on the properties it lets to ensure it complies with its statutory obligations. I find it unlikely that the Council was not aware there was a gas fire in the living room, and even if it was not clear, this detail should have been checked before the offer was made. 

30. While the family remain in the property, the Council was in breach of the law and could be prosecuted for the offence. This is further maladministration.

The two emphasised points in section 29 and section 30 above are hugely important with regard to the coalition’s homelessness policy changes that housing minister Mark Prisk signed off last week and come into effect on 9 November 2012.  I have copied and pasted the Statutory Instrument at the end of this but in simple terms it allow councils to discharge homeless families into the private rented sector providing the accommodation is suitable for a number of reasons.

Yet the LGO statement above clearly makes the case that the council attempting to discharge the main homeless duty into any accommodation must KNOW what that accommodation comprises in terms of size of rooms and whether it has gas fires or back boilers in any rooms.  In short the council has to have visited that accommodation BEFORE it can discharge the main homeless duty.

This is a huge and very significant issue…

1. Who in the council visits?
2. Does this need an environmental health officer (EHO) to do this or will a cursory 5 minute look around by a homeless officer do?
3. What and where is the official council policy on such visits?
4. Will PRS landlords want to be regulated in this way as this is what it amounts to?

….and a whole host of other questions arise which will see councils having to become much more risk conscious if they attempt to use PRS accommodation to discharge the main homeless duty.

I posted last week that the Overall Benefit Cap that starts from April 2013 will see a huge rise in homeless families in London caused directly by the OBC and its £500pw cap.  So London boroughs having to check physically all PRS homeless provision BEFORE referring or discharging people there is a huge workload and cost increase.

Moreover, given that a 2 parent 2 child family such as the one in the Ombudsman case above will receive about £256 pw in welfare benefit and the average two-bed PRS rent in London is £321.48, this would see a council making a determination that it is suitable for a family to find £77.48 pw out of their welfare benefit (30% of it) to pay the rent as housing benefit will be capped at £244pw.  Any such decision or determination by a council that this is ‘suitable’ I would expect huge legal challenge to.

[Figures above from official VOA study into PRS rent levels and referenced here]

In summary while the Ombudsman issue does concern overcrowding and an important issue is raised in that area; the REAL issue is the homelessness impact issues discussed above.

**************************************************************************

The Homelessness (Suitability of Accommodation) (England) Order 2012

Made 11th October 2012:       Laid before Parliament: 17th October 2012

Coming into force:       9th November 2012

1.—(1) This Order may be cited as the Homelessness (Suitability of Accommodation) (England) Order 2012 and comes into force on 9th November 2012.

(2) This Order applies in relation to England only.

Matters to be taken into account in determining whether accommodation is suitable for a person

2. In determining whether accommodation is suitable for a person, the local housing authority must take into account the location of the accommodation, including—

(a)where the accommodation is situated outside the district of the local housing authority, the distance of the accommodation from the district of the authority;

(b)the significance of any disruption which would be caused by the location of the accommodation to the employment, caring responsibilities or education of the person or members of the person’s household;

(c)the proximity and accessibility of the accommodation to medical facilities and other support which—

(i)are currently used by or provided to the person or members of the person’s household; and

(ii)are essential to the well-being of the person or members of the person’s household; and

(d)the proximity and accessibility of the accommodation to local services, amenities and transport.

Circumstances in which accommodation is not to be regarded as suitable for a person

3. For the purposes of a private rented sector offer under section 193(7F) of the Housing Act 1996, accommodation shall not be regarded as suitable where one or more of the following apply–

(a)the local housing authority are of the view that the accommodation is not in a reasonable physical condition;

(b)the local housing authority are of the view that any electrical equipment supplied with the accommodation does not meet the requirements of regulations 5 and 7 of the Electrical Equipment (Safety) Regulations 1994(2);

(c)the local housing authority are of the view that the landlord has not taken reasonable fire safety precautions with the accommodation and any furnishings supplied with it;

(d)the local housing authority are of the view that the landlord has not taken reasonable precautions to prevent the possibility of carbon monoxide poisoning in the accommodation;

(e)the local housing authority are of the view that the landlord is not a fit and proper person to act in the capacity of landlord, having considered if the person has:

(i)committed any offence involving fraud or other dishonesty, or violence or illegal drugs, or any offence listed in Schedule 3 to the Sexual Offences Act 2003(3) (offences attracting notification requirements);

(ii)practised unlawful discrimination on grounds of sex, race, age, disability, marriage or civil partnership, pregnancy or maternity, religion or belief, sexual orientation, gender identity or gender reassignment in, or in connection with, the carrying on of any business;

(iii)contravened any provision of the law relating to housing (including landlord or tenant law); or

(iv)acted otherwise than in accordance with any applicable code of practice for the management of a house in multiple occupation, approved under section 233 of the Housing Act 2004(4);

(f)the accommodation is a house in multiple occupation subject to licensing under section 55 of the Housing Act 2004 and is not licensed;

(g)the accommodation is a house in multiple occupation subject to additional licensing under section 56 of the Housing Act 2004 and is not licensed;

(h)the accommodation is or forms part of residential property which does not have a valid energy performance certificate as required by the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007(5);

(i)the accommodation is or forms part of relevant premises which do not have a current gas safety record in accordance with regulation 36 of the Gas Safety (Installation and Use) Regulations 1998(6); or

(j)the landlord has not provided to the local housing authority a written tenancy agreement, which the landlord proposes to use for the purposes of a private rented sector offer, and which the local housing authority considers to be adequate.

Signed by the authority of the Secretary of State for Communities and Local Government

Mark Prisk

Minister of State

Department for Communities and Local Government

Could the OBC cost a net £500m MORE in HB?

Last week I said that the OBC would create 130,000 homeless families in 2013/14 and today I began to think how much MORE in HB this will cost the public purse.

This is a surprising area to consider even for my obtuse brain as surely the OBC in the way it works ONLY cuts Housing Benefit.

The process starts with the cap then takes away welfare benefit payments and leaves a residual amount TOWARDS the payment of rent. So if a 2 child 2 parent family in London gets £256 in welfare benefits this leaves £244 to pay towards rent and with PRS 2 bedroom rents averaging £321pw in London according to VOA figures then we see a huge and unaffordable cut of £77pw and then eviction.

The DWP original ‘final’ estimate in July 2012 was that the OBC will save £270m per year in HB yet that ignores any additional cost of homelessness it creates which last week I argued would directly cause 130,000 additional homeless families next year alone and was for two-parent families with two or more children from the private rented sector in London (and nearby areas).

If we take the cost of temporary accommodation at the equivalent of a room in a cheap london B&B hotel we see this is £483 per week or £69 per night and bear in mind most will require more than 1 room and it means circa £193pw additional HB per case (over the 2 bed £290pw LHA rate) and 130,000 of those becomes an additional £1.3bn per year!

So the OBC could see an additional £1.3bn cost to the HB bill and £2.6bn cost if these families need 2 rooms at B&B hotels. The coalition impact assessment on the OBC takes no account of this additional homelessness and its cost and simply maintains it will save money.  It said in July 2012:

“The above are the most recent, updated costs which take account of the transfer of benefits away from households affected in Great Britain. At the outset, it is estimated that 56,000 households will have their benefits reduced by the policy, losing on average around £93 per week.”

Extrapolate that and we see a £272m yearly saving [(56000 x £93) x (365.25/7)]

Then last week the DWP issued a revised figure saying this would affect almost 120,000 families which I commented upon here as you would expect given the figure the DWP estimate at September 2013 is more than twice the figure of just 3 months ago and by end of March 2014 rises to 172,000 more than 3 times the figure of 3 months ago and 172,000 losing £93 per week is a HB cut and reduction of £835m per year.

So the OBC will save 3 times as much in HB spend as it will affect 3 times the number of people and this is £835m on last weeks DWP figures.  Yet the additional homeless bill at a conservative estimate will be £1.3bn more in HB.

So making a net ADDITIONAL COST of at least £0.5bn to the HB budget.

I have deliberately underestimated the cost of temporary accommodation B&Bs in the above.  The 130,000 homeless families are those in the PRS with 2 children or 3 children or 4 or 5 children.  Such families will cost far more than an average of £69 per night to accommodate and tha figure could easily double even for a family with 2 children taking up two rooms at  B&B hotel.  That would put the extra cost at £2.6bn per year not £1.3bn.

One final point.  An article earlier this year looked at the LHA rent cap and its impact.  This reveals in simple terms what is to come with the OBC.    A two-parent family with 4 kids evicted for arrears as the LHA cap at £400pw wasnt enough to pay the £450pw PRS rent.  The family was evicted made priority need homeless and put up in two rooms at a Premier Inn at £69 each per night – £966pw in TA cost.

That article is the simplest way to understand why the OBC will directly lead to huge increases in homeless families.  A £50pw shortfall in HB meant eviction for arrears as this was too much to make up out of welfare benefits.  The OBC average shortfall is £93pw almost twice that amount and so mass homelessness will be created by the OBC when it comes online in April 2013. The above example I give for a 2 bed property in London sees a £77pw cut.

The added cost of homelessness just in HB terms more than outweighs any HB savings from the OBC cap. This flagship Tory policy revels in the spin of ‘we are cutting back on welfare benefits and reforming benefit’ is here is exposed as a charade and a fiction.

The OBC – 130,000 more homeless families next year?

Many of my recent posts share a similar theme that the Overall Benefit Cap is the most dangerous of the ‘welfare reforms’ and will do the most damage to social housing and it is the greatest risk to social landlords bottom line.  Here I develop that even more and show:

(a)   The OBC to be a massive transfer of arrears risk from the private rented sector to the social rented sector

(b)   The bedroom tax is a temporary measure which has a solution whereas the OBC is a permanent one and doesn’t have a solution

(c)    The OBC within 6 months of introduction in April 2013 will see an additional 100,000 plus families evicted and made homeless

(d)   The OBC directly creates poverty amongst social tenants

The bedroom tax is a scandal social landlord’s cry, with justification, yet it only levels the playing field with the PRS and private tenants are paid LHA based on their family composition not on the property they occupy which is what the bedroom tax does.

It will take us 7 years to deal with the bedroom tax and make better use of stock social landlords cry.

So the bedroom tax is temporary and can be solved within 7 years then!

The rest of this post looks at what the OBC will do in the next 7 years with the view of making social landlords and social tenants wake up and smell the coffee.  The OBC is the death of social housing, the OBC will massively transfer risk of arrears from the PRS to social housing; the OBC will massively attack housing association finances and so much more.  Yet social landlords still bemoan and focus upon the bedroom tax and direct payment of HB to tenant which by comparison are insignificant compared to the permanent damage the OBC will have.

The OBC is simple in its workings, frighteningly so as at inception in April 2013 less than 6 months away it takes the cap figure of £500pw deducts the amount of welfare benefits tenants get and the residual becomes the maximum payable towards rent.

For example £500 cap, 5 child family gets £464 in welfare benefit means what is left (the residual) is just £36 pw and so that is all the family gets towards its rent on its London typical 4 bed SRS property of £136pw.  Housing Benefit is cut by £100pw in that example and HB is the ONLY benefit to be cut or capped in the OBC.

[The ‘large’ family issue is well-known and I call this the fundamental flaw in the OBC as the crudeness of the cap level impacts harshly on those with the highest welfare benefits, namely large families.]

That HB is the ONLY benefit to be cut or capped is a major transfer of risk to arrears from central government to social landlord and surprisingly not seen that way by social landlords who rely on HB for 62% of their income!  And social landlords expect and generally receive 100% or full rent in HB.  From April 2013 less than six short months away that no longer happens.

I argued earlier this week that the OBC is much worse than the bedroom tax which was largely well received yet had a few typical comments from social landlords along the lines of we have very few large families and ten times as many tenants will be hit by the bedroom tax than by the OBC.  That has some validity if you only look at the ‘now’ and not into the immediate future, if you ignore the context, if you see it in a vacuum and just at April 2013. Yet that is a dangerous view and a blinkered one.

Time to look at numbers and figures to explain.

RENT LEVELS 2013 AND 2015

BEDROOMS	PRS-2013	PRS-2015	SRSL-2013	SRSL-2015	SRSP-2013	SRSP-2015
2	154	161	115	125	78	84
3	177	185	126	137	86	95
4	309	323	137	149	101	112

KEY: PRS = private rented sector; SRS = social rented sector; L = London; P = provinces

WELFARE BENEFIT LEVELS 2013 AND 2015

FAMILY SIZE / CHILDREN	2013	2015
A)       2 parent 2 children (3 bed)	258	271
B)       2 parent 3 children (3 bed)	324	338
C)       2 parent 4 children (3 bed)	392	408
D)       2 parent 5 children (3 bed)	464	484
Overall Benefit Cap (OBC)	500	515

Let us start with family composition (A) with 2 children of 11 and 13 one boy and one girl.  In 2013 when the OBC starts they receive £258 in welfare benefits and live in a 3 bed PRS property in the average provincial town with a rent of £177pw – a total benefit figure of £435pw.  They will not be affected by the cap.  However if they live in Welwyn Hatfield, Grant Shapps constituency they will pay an average rent of £255 and so be capped as the total is £502pw. Yet God forbid they live anywhere in London with an average 3 bed rent of £403pw as this takes them subject to a £161pw cut which is clearly unaffordable and will lead sharply to arrears to eviction to temporary homeless accommodation (B&B hotel).

Straight away we see how the OBC captures a PRS family with 2 children in London and makes them homeless.  It obviously will capture though with 3 or more children too and all average private rent figures used here come from the VOA official study of almost half a million private rents in-payment and the most authoritative and reliable PRS data we have. 

So every family with 2 children or more living in the PRS will be made homeless because of the OBC.

London has 280,930 PRS tenants claiming housing benefit according to official DWP HB figures.  I don’t have figures on what % are in 3 bed (or higher) PRS properties but if it is 36% – not an unreasonable assumption – then it is 100,000 families the OBC will directly make homeless in London alone in 2013!

These PRS families from the temporary B&B in London can’t be re-housed in the PRS anywhere in London or many of the provincial environs either.  They have to move out of London or hope social housing becomes available there which of course adds 100,000 to demand for social housing in London alone.  This is of course unlikely and so you thought the Newham to Stoke fiasco was bad looking to export 50 homeless families!!

Each of the London Boroughs will have 3,000 homeless families to export next year and of course before that find 3,000 B&B hotel places in London and pay the cost of them.

Big tip there for the PRS about developing B&B hotels in the capital!  With that demand you can charge what you like can’t you?  Crunch the numbers at just 6 weeks in TA and that’s 18,000 rent weeks per London Borough.  At £69 per night per room in a Travelodge and assuming two rooms per family that’s about £17.4m per LB per year or across London at a maximum 6 weeks (haha!) that’s 600,000 rent weeks @£966 per week, a mere £580m….just for London alone.  Wow, the Tories really have thought the OBC through haven’t they!!

Outside of London?

Lets us assume that the 2 child family receiving welfare benefits can afford to pay £30pw out of their weekly £258 welfare benefits towards rent.  That is a huge assumption considering all welfare benefits are at a minimum subsistence level; however this means all areas with an average 3 bed PRS rent higher than £272 per week will be unaffordable.

This will include the following areas using VOA official figures of 2011 PRS rents and in brackets is 35% of PRS housing benefit claimants there:-

Brighton – (4869)

Oxford – (1275)

Surrey – (5800)

Most of Hertfordshire – (5500)

Much of Essex – (12000)

The above far from comprehensive list adds another 30,000 that the OBC will make homeless AND that figure of 130,000 so far, and it could be higher, is based on 2 child families in a 3 bed PRS property.

This is not just about large families.

What it does show is that the risk-averse private landlord will – justifiably with the profit motive – evict those families who are at risk of building up arrears.  Because that leads to homelessness, temporary accommodation and then being re-housed in social housing its is a transfer of rent arrears risk from the PRS to the SRS. 

The OBC directly and very quickly becomes just that, the transfer of financial risk from private to social housing.

So far we see the OBC transferring families’ small and large (hopefully) to social housing – as where else can they go? – And the risks to arrears that holds AND massively increase demand transfers to social housing.

Possibly if some of the London and SE families follow the Newham to Stoke idea and export their homeless families then this increases PRS costs in the likes of Stoke or Hull or wherever the OBC diaspora finishes.  The Newham model saw a 56% rental increase being offered to Stoke private landlords which of course would have the effect of seeing existing Stoke tenants evicted and made homeless to make way for them!  It also sees average PRS rental prices rise and so would see more paid out in LHA by the public purse (on top of Stoke paying for the increased homelessness costs of Stoke residents!)

So far we see the impact of the OBC on the private tenant and the PRS landlord and how that impacts on social housing demand and social landlord risk of arrears, so what about social housing tenants?

To look at social housing tenants it is easier to begin with rent levels which to save scrolling up reader are reproduced again below:

RENT LEVELS 2013 AND 2015

BEDROOMS	PRS-2013	PRS-2015	SRSL-2013	SRSL-2015	SRSP-2013	SRSP-2015
2	154	161	115	125	78	84
3	177	185	126	137	86	95
4	309	323	137	149	101	112

Social rent levels in London are higher that provincial SRS levels and at inception of OBC in six months time we see a 3 bed rent level of £126pw meaning any family with welfare benefit level of less than £374pw won’t be cut.  Yet a 4 child family at £392 may just be able to manage (despite plunging into poverty) as this is an £18pw cut in HB, yet still £940 per year in London.  A 5 child family on £464 of welfare benefits in a 3 bed house will be evicted nationally as they won’t be able to find between £50pw in the low-cost provinces and £90pw in London towards their rent.

Jump forward to the end of this parliament in just over 2 years and we see the same 4 child family in London having an OBC of £515, welfare benefits of £408 and a rent of £137 so the tenant make-up goes from £18pw in 2014 to £30pw in 2015 – the systemic flaw in action and becoming unaffordable and/or placing tenants in poverty as any amount of tenant make-up to pay rent have to come from subsistence level welfare benefits.  Factor in the increased risk that direct payment to tenants holds and especially monthly benefit payments and this 4 child family in a 3 bed SRS property in London becomes a risk too far financially for social landlords.

Go the 2020 and the end of the next parliament and we see an OBC of £555 and welfare benefits for a 3 child family being £377 yet a London 3 bed SRS rent of £171 making £555 in total – the same as the OBC.  Compare that to 2013 when OBC starts of a £500 cap WB of £324 and a London 3 bed rent of £126 making a benefit total of £450 – yet the £50pw difference has disappeared and again is the systemic flaw in action.

The systemic flaw in essence sees the value of the OBC erode year on year as rent levels rise faster than the overall benefit cap or OBC.  It directly creates poverty for the social tenant on benefits and that’s whether the tenant family has been living on them for 20 years or has just become unemployed after working full-time for 20 years.  This is not a Daily Mail issue of all those on benefits are morally repugnant etc, it applies to a one wage earning family where that one wage earner has just lost his or her job – a common occurrence in today’s austere times.

In 2020 a 4 child family in Hull – the lowest social housing cost area – will get £456 in welfare benefits and will have a 3 bed SRS rent of £126pw a total of £582 against an OBC of £555.  So in 7 years a 4 child family becomes a financially risk too far for social landlords in the lowest cost provincial area!  The £27pw make up then is a change from a minus £23 figure in 2013 (£392 in WB + £85 in rent = £477) – again a £50pw reduction in overall benefit because of the systemic flaw.

Just 7 years time – the time frame that social landlords now are saying is needed to make best use of stock and deliver a solution to the bedroom tax!  The bedroom tax is thus in that sense a temporary issue in comparison to the permanent and increasingly punitive OBC which will have far more devastating financial consequences for the SRS landlord and the SRS tenant.  How many PRS tenants with large families will have been evicted by then and seeking SRS accommodation?

As I said earlier factor in the context of direct payment to tenant, monthly paid and of course the council tax benefit cut for working-age tenants (and the £10bn pa further welfare benefit cuts now confirmed last week which will also fall on working-age tenants) and we begin to see why 4 child families cannot afford social housing and when they try they are plunged into poverty and are a financial risk too far for even the cheapest rent of social landlords nationwide by 2020.

Go to end of the next parliament in 2025/6 and we see OBC of £597pw and 3 child WB of £430pw.  This leaves a maximum of £167pw from the cap to pay for rent.  Yet a London 3 bed SRS property will cost £208 pw by that time – a shortfall of £41pw, and a low-cost provincial 3 bed SRS rent in Hull will be £184pw – a shortfall of £17pw.

In just 12 years time (5 years after the bedroom tax has a solution) the OBC with its inherent systemic flaw makes social housing unaffordable for a 3 child family nationwide!

This brings me back to the fundamental question….Where the hell are families going to live?

The answer has to be in social housing obviously as after all that is the purpose of social housing and it can’t and won’t be the private rented sector.  Yet what a huge financial risk the OBC becomes for social landlords and social tenants.  The risk of arrears for social landlords is monstrous as the 3+ child families will end up there.  4 child families in 2025 will get £88 towards a rent of £184 for a 3 bed SRS property and a 5 child family won’t get a penny in HB and a £5pw cut in welfare benefits too by 2025 and will have to pay full rent!

What the hell are social landlords to do to mitigate against this huge risk to arrears which threatens their very survival?

Will registered providers still have 100% nomination agreements with their local councils, the ones struggling with huge homeless demand and huge homeless cost and will want to move the large families out of TA into social housing?  RPs will have to renegotiate these or suffer the high risk of arrears tenants they will give.

What about choice based lettings?  Greater priority for tenants with larger families and been homeless longer?  That becomes a choice too far for RPs as all it will see is them having to take tenants with the greatest risk to arrears. RPs will want and will need more control and more selectivity over who they accommodate directly because of the arrears risk the OBC creates and that can only men denying tenant choice!

Nomination agreements and CBL will act as constraints to RPs becoming more risk averse which they will need to become for financial survival.  There are many other constraints to this and RPs cannot become financially risk-averse as we know the PRS is and can be and with the OBC will be.  I haven’t even begun to discuss other matters here such as the ‘affordable (sic) rent’ model with its 65% higher SRS rents and how the OBC will impact.  AR is a huge risk too far for RPs a point I made many months ago yet it hasn’t stopped RPs getting involved in this fiasco to the detriment of social housing as a model.  Those RPs that haven’t got involved in the AR farce can afford a little pat on their own backs as they will be better placed to survive the huge risk to arrears that the OBC gives.

Hang on Joe it’s the coalition that developed and introduce the OBC so why are you having a go at social landlords?

Because social landlords have become obsessed with the short-termism of the bedroom tax and got wound up over direct payment of HB to the tenant and don’t see the bigger picture – that the OBC is the most pernicious, punitive and damaging of all the welfare reforms to the survival of social housing and to the survival of SRS landlords.  In doing so they have been unbelievably inept and let themselves and more importantly their vulnerable tenants down they have refused to even see the dangers let alone challenge or lobby against the OBC.

This is a policy that will create mass homelessness something Shelter, Crisis, Homeless Link et al haven’t stated, yet that doesn’t excuse social landlords from seeing the inevitable increased demand and increased risk to arrears it places on them.

This is a policy that acts as the greatest contraceptive in the history of mankind, which means initially large families have to work and increasingly means smaller and smaller families have to work.  Yet even if they do the risk of unemployment still leaves the huge risk to arrears for social landlords.

This is a policy that when spun initially by the coalition saw a 74% approval rating from Joe Public and the lack of challenge  – not even when Joe Public went into uproar over the Newham to Stoke fiasco – only serves to harden the public’s perception.  Social landlords do have a role as experts in the field and a role to challenge ridiculous policy that damages their sector, or their movement and especially their business.  Yet social landlords didn’t and to make matters worse for themselves they jumped on the AR bandwagon!

The lack of challenge by social landlords to the OBC is chronic ineptitude – and yes of course the CIH and NHF and all the other supposed umbrella groups that claim to represent the sector have been noticeable by their silence on this issue.  Yet even those that maintain that there is no sector and it’s a case of each social landlord for themselves have also done nothing to challenge the outrageous consequences of the OBC. Social landlords acquiescence to the OBC makes Neville Chamberlain seem like a master tactician by comparison!

More importantly social landlords like to perceive themselves as community champions offering more and more services to social tenants.  Yet here with the OBC are saying absolutely nothing about the OBC plunging those same tenants into poverty.

What’s the point of bigger ASB teams, setting up credit unions and all the other added services for the social tenant if the social tenant can’t afford to live in social housing?

The OBC starts in less than 6 months but the ‘sector’ response is we have a tiny minority of large families!  Wake up and smell the coffee and put a large brandy in it while you’re at it!

HB ban on under 25s – more DWP nonsense!

An article today appears in Inside Housing stating that DWP are in fact considering banning HB to those under 25 but only for new cases.

“A spokesperson said: ‘We’re looking at a range of options for future reforms to the welfare system – changing the eligibility criteria for housing benefit is one of these. ‘Any changes would affect future claimants only and we would still ensure that vulnerable people remain protected.’

Joe Halewood, a housing benefit consultant, said restricting the measure to future claimants would only save a small amount of money, around £90 million a year after 10 years.”

I have no idea where this £90m per year comes from though I spoke with the journalist over this issue which I said was a non-runner and maintained my view that this won’t happen and reiterated my long maintained view that its a smokescreen for the introuduction of SAR to social housing.

Some facts from the official HB data

• Since the election in May 2010 the HB claimant count has increased by 11,208 claimants per month.
• 7.62% of HB claimants are under 25
• Therefore 855 under 25 HB claimants would be new each month / 10260 per year and DWP would ‘save’ by not paying them in this idea
• Average HB payment to under-25’s is £93.94 pw.

Hence restricting HB to all new under 25s (including those working those with children, those entering single hostels or DV refuges) would save just £50.29m per year and a far cry from the nearly £2bn Cameron said this would save back in June in yet another attempt to blame young people as welfare scroungers and conveniently forgetting that pensioners receive £2 of every £3 in welfare benefits.

The DWP are in polite terms talking through their hat. As I have always maintained the ban on HB for under-25s is a non-starter and it is kite flying and a smokescreen for the introduction of SAR to social housing. This by comparison would save about £40pw on the 894,200 under 35s who claim HB and even if just restricted to all under 35s with no child dependents these reduced 433,630 claimants getting £40pw less sees the government saves £905m per year. Take away the care leavers, hostel residents and refuge residents and the saving is still at least £500m per year!

This is a no brainer!

My view is SAR will be applied to social housing as this completes the levelling of the playing field of HB eligibility in the SRS to LHA in the PRS that the bedroom tax does in all cases excepting SAR!  This will cause mayhem and have horrific consequences as I said when I first mentioned this yet it is only levelling the playing field for HB eligibility with the private sector in political terms – an easy sell.

By the way I’m a supported housing consultant not a HB consultant who just happens to be able to read official data and work a calculator!  I have no idea where the £90m pa comes from in the article

3 times more tenants hit by OBC next year DWP figures reveal

The Overall Benefit Cap will cut or cap 3 times the number of tenants than the figure the DWP estimated it would just 3 months ago in July 2012.  As the OBC will ONLY cut or cap HB and not any welfare benefits (unless you have 6 or more children) then this is a huge risk to rent arrears.  The detail I discuss below:

The Overall Benefit Cap (OBC) I have called the most punitive of all the welfare changes.  Specifically I have said it holds a fundamental flaw in that the crudeness of the cap punishes large families and secondly that the systemic flaw means more and more smaller families will be hit by the cap each year.  Collectively I have argued the OBC is a greater risk to arrears and eviction and homelessness than other welfare ‘reforms’ such as the bedroom tax or direct HB payment to tenant rather than landlord.

Today I note a DWP release of information concerning letters DWP have sent out to those they believe will be affected by it.  The attached spreadsheets contain an interesting table which I reproduce below:

	Mail shot   exercise
GB breakdowns	May-13	Jul-13	Sep-13	Total   contacted
Total individuals	85,820	17,060	17,090	119,980
England	79,290	15,170	15,580	110,040
Scotland	3,850	1,250	920	6,010
Wales	2,680	640	600	3,920
1 to 4 Children	52,850	10,070	10,730	73,650
5 or More Children	24,190	4,070	4,760	33,020
No Children	8,790	2,930	1,600	13,310
Couple With Children	47,130	9,460	10,860	67,440
Couple With no Children	740	260	160	1,160
Lone Parent	29,900	4,680	4,640	39,220
Single	8,050	2,660	1,440	12,160
Loss – Up to £50	35,600	9,360	9,610	54,560
Loss – Over £50, up to £100	20,350	3,900	3,740	27,980
Loss – Over £100, up to £150	11,660	1,730	1,770	15,150
Loss – Over £150	18,220	2,080	1,980	22,280
Private Landlord	42,780	7,880	8,370	59,030
Social Landlord	36,590	8,660	8,210	53,460
Temporary/Short-Term Acco	2,020	210	330	2,550
Unknown Tenure Type	4,420	320	190	4,930

Comments

There are a huge number of avenues of analysis from the above and in general terms we see 89% of those affected are families and especially larger families with 5 children or more.  This is hardly news as a 2 parent 5 child family getting full their full welfare benefit entitlement will receive about £463pw thus leaving only £37 or so per week as the maximum allowable towards paying rent.  It supports strongly the fundamental flaw posit I have repeatedly made and also the point I have repeatedly made that the OBC is nothing more than a housing benefit cap as HB (or LHA its private sector variant) is the ONLY benefit to be cut or capped.

Social landlords may (?) have a family composition breakdown of existing tenants which would show for example how many tenants have 5 children or more.  I doubt this would exceed 5% of tenants yet over 20% of those affected by the OBC will be these ‘large’ families and the fundamental flaw becomes apparent in context.  What will really worry them however is that 61% of those DWP see affected by the OBC have between 1 to 4 children, small or smaller families, though it is unfortunate (and perhaps deliberate?) that the DWP figures don’t break this down any further.  Why DWP didn’t break down this 73,650 figure into 1, 2, 3 and 4 children and by tenure type I will leave with you to consider as it would have provided much more interesting data on which landlords (social and private) could have used as meaningful information.

It would also have exposed the real risk to arrears that family composition has for private and social landlords which will affect allocation policies in social landlords and undoubtedly so in the PRS.  It may come as a surprise to some that 45% of tenants affected are in the social rented sector (SRS) as they errantly believe the OBC will only affect private tenants with the much higher rent levels in the PRS.  Yet the last impact assessment of July 2012 had SRS tenants at 46% of those affected.

However this last OBC impact assessment had just 56,000 persons affected and this one just a few months later has 119,980 affected more than double the estimate of just 3 months ago!

This is a chronic case of underestimation by DWP officials (ie chronic incompetence) and it also means that parliament has NOT given this policy any semblance of correct scrutiny, more correctly parliament has not had the opportunity to scrutinise the OBC for what it means in practice!

Perhaps now social landlords WILL look at the OBC and realise the OBC is a far bigger threat to them through arrears than the bedroom tax and direct HB payment to tenants as I have stated repeatedly?  Wake up and smell the coffee indeed!

They they should and also recognise the systemic flaw posit which makes this starting position much worse over time and is also revealed in even these ‘abstract’ figures which makes the risk of arrears (social landlord problem) becoming eviction (a local government problem) and then homelessness (a local and central government problem particularly with cost).

When the DWP drill down into its data to send out the letters every two months they see an additional 17,000 persons affected each time which when extrapolated suggests an additional 100,000 tenants affected by the OBC each year!  This is the systemic flaw in operation though even I did not see it as starkly as this!

Perhaps I am over-egging the figures here and it is more to do with the lack of quality of DWP data and I tend to agree with that. Though think on that for a second and you see the nightmare of all the welfare reform policies and especially the Universal Credit policy due in October 2013 – DWP data is wholly inadequate and the mistakes this will create in terms of errant benefit payments is a nightmare!

In political terms the more than doubling of those affected by the OBC in just 3 months reveals that the policy is unbelievably ill-thought through, has not been subjected to any real parliamentary scrutiny and was issued by the coalition without them knowing what the consequences were.  That, in apolitical terms, is a disgrace and is inept governing that is also an affront to democracy in its lack of scrutiny.

Let’s talk about numbers and savings. The July 2012 impact assessment had the OBC broken down in Chart 2 on page 11 which projected a £270m saving in 2013/14.  If we use the same average figure of £93 pw cut this becomes in today’s version a saving of almost £582m in the first year to government, and of course £582m more of an arrears risk to landlords.

It means the DWP estimate in July 2013 just 3 month ago has increased by 116%!!!

 

For social landlords who thought that only 25,760 social tenants would be hit (46% of the 56000) it is now 53,460 tenants (by September 13) – more than double and rising by 4217 per month to make over 78,500 by March 2013 – or triple the estimate of just 3 months ago.

3 times the number of social tenants will be hit next year by the OBC than the DWP said just 3 months ago! 

Extrapolate that and it is 100,000 social tenants hit by the OBC by September 2014!

 

(Better throw a stiff whisky in that double espresso!)

Brief Comments

What may go unnoticed is that 2,550 people in Temporary / Short Term Accommodation will be hit by the OBC.  A comparatively small number yes but TA can only mean single homeless, homeless families or refuge residents.  What else can it mean?  And what about double this number in “Unknown tenure type?”  What does that mean apart from the DWP have chronically incomplete data…upon which this coalition are basing policy which will affect some incredibly vulnerable people…

What about 12,160 single people being affected by the OBC?  Where are they and who are they?  £250pw LHA cap on a 1 bed property in London and £71pw dole only makes £321pw of the £350pw cap.  Oh they are only single people Joe who give a stuff…Quite!

In summary the DWP have this data and can release it without any risk to the anonymity of those involved.  Yet that would just prove their incompetence even more but would allow landlords, social and private, to make much more informed decisions and it seems DWP must be scared of the consequences which would likely see all landlords becoming much more risk averse in their allocation policies.

Now who do we know that is good at getting FOI releases from the DWP?

 

UPDATE 14th November 2012

I have just seen the slides from a presentation given by the DWP to the South West Observatory conference yesterday – the date is important.  The link to all slides is here

At this link you will find a powerpoint presentation by Alan Sullivan, Managing Consultant, Universal Credit Prgramme, Department for Work and Pensions whom you would think would know how many people would be affected by the OBC.  From my reporting of the DWP notice on 18 October – 25 days ago – that the DWP spokesperson would know the figures the department that employs him releases wouldnt you?  Yet in his presentation he says it will be 56,000 and not the 171,000!

Please see slide 7 of his presentation below

the benefit cap will be introduced from April 2013 and will apply to the combined income from the main out-of-work benefits, plus Housing Benefit, Child Benefit and Child Tax Credits

•the benefit cap levels will be:

–£500 per week for couples and lone parents

–£350 per week for single adults

•56,000 households will be affected by the cap in 2013/14

•the average benefit reduction is £93 per week per household

 

I dont need to comment on this incompetence / errant information do !?

 

 

 

The systemic flaw in overall benefit cap will destroy social housing

Today sees the release of the September inflation figures the ones ordinarily used to increase welfare benefit rates and social rent levels from next April.  Welfare benefits increase by CPI which is 2.2% and social housing rents by a formula using the RPI figure of 2.6%.

In April 2013 we see the Tories welfare reform policy of the overall benefit cap (OBC) introduced at £500 per week for families and this is set at, and presumably increased by, wage inflation which stands at 1.5%.

So why are these figures above a much bigger problem for tenants and social landlords than the bedroom tax or direct HB payment to tenants?  – It is called the systemic flaw.

The systemic flaw in the OBC I first developed a few months back and with the release of the September inflation figures today we can see what this will mean in figures for tenants and landlords and they make scary reading.

If we assume that all the above inflation figures remain constant until the end of the next parliament then we can see how the overall benefit cap will operate in the table below using the example of the Smith family.  Mr & Mrs Smith live with their 4 children in a 3 bed flat they rent from their local London social landlord and receive welfare benefits of £392 per week and their rent is £126 per week.  Currently they receive a total of £518 pw in welfare and housing benefits yet this will reduce in April down to the maximum of £500 per week with the OBC.

The £18 per week deduction will be taken off their HB as that is how the OBC operates.  The £500pw cap takes off the welfare benefit amount of £392 thus leaving a maximum of £108 pw that can be paid in HB towards their £126pw rent.

Table 1 – The OBC in operation (without rent figures)

YEAR	OBC CAP	WELFARE BENEFIT	MAXIMUM HB
2013	£500	£392	£108
2014	£507	£400	£107
2015	£515	£409	£106
2016	£523	£418	£105
2017	£531	£428	£103
2018	£539	£437	£102
2019	£547	£446	£101
2020	£557	£456	£101
Diff 2013-2020	+£57	+£64	-£7

As you can see above the OBC increasing by 1.5% per year and welfare benefits increasing by 2.2% doesn’t make a lot of difference.  The cap increases by £57pw over that time and welfare benefits by £64 and this £7 difference means £7 less per week is given towards HB thus appearing broadly neutral.  So watch what happens when we add in rent levels and the systemic flaw appears!!

Table 2 – The OBC in operation (with rent figures)

YEAR	OBC CAP	WELFARE BENEFIT	MAXIMUM HB	WEEKLY RENT	TENANT MAKE-UP
2013	£500	£392	£108	£126	£18
2014	£507	£400	£107	£132	£25
2015	£515	£409	£106	£138	£32
2016	£523	£418	£105	£144	£39
2017	£531	£428	£103	£150	£47
2018	£539	£437	£102	£157	£55
2019	£547	£446	£101	£164	£63
2020	£557	£456	£101	£171	£70

Note: The rent figure is increased using the normal formula of [(RPI+0.5%) + £2]

The Smith family who suddenly find in April 2013 that they will have to pay £18pw towards their rent because of the cap will see this rise dramatically to become £70pw by 2020.

This is the systemic flaw explained and it occurs when different inflation or uprating figures are applied to the 3 variables of the cap, welfare benefits and rent.  In the above example it means the Smiths will have to pay £939 per year towards their rent from their welfare benefits in 2013 which rises to £3,652 per year by 2020. 

And this is in a 3 bed property so there is no downsizing element to this and the Smiths could not reduce their rent by moving to a 2 bed property.  They could move out of London, uprooting the family, social networks, change the schools of their children, etc yet would still have to contribute towards their rent even if they moved to the provinces.  They would have no rent make-up in 2013 but this rises to £33 per week in 2020 – a harsh choice indeed!

Social landlords who have focussed on the bedroom tax and direct payment of HB to tenant rather than to landlord fear the impact on arrears these two matters will have.  Many social landlords have doubled their provision for bad debt in response to these arrears threats and social landlords will increase their rents by the maximum formula allowed because of the risk of arrears as they have no choice but to do so.

Yet while increasing rents by 3.1% plus £2 per week (the maximum allowed next April) to mitigate the risk of arrears caused by the bedroom tax and direct payments – as social landlords have little choice but to do – brings the systemic flaw to the fore.

An £18pw HB deduction on a rent of £126pw in 2013 is a 14.3% reduction and broadly similar to the bedroom tax reduction of 14% for underoccupying by 1 bedroom.  It is lower than the £31.50 25% reduction the bedroom tax would have for underoccupying by 2 bedrooms.

Yet by 2020 the £70pw reduction on a rent of £171 is a 41% reduction in HB and much higher than the 25% bedroom tax reduction.  This is why social landlords have much more to be worried about with the systemic flaw than the bedroom tax.

Yet the systemic flaw is NOT recognised in that way and it needs to be and this is why the overall benefit cap is a much more punitive policy than the bedroom tax for both social tenant and social landlord.

IF social landlords do not inform tenants of this NOW then they run the risk of tenants blaming social landlords for their rent increases over the next few years, increases which I have said are necessary and an obvious reaction to the bedroom tax and direct payments issues.  Whereas if tenants are not informed of this now they will merely see social rent increases as a double whammy by the landlord on top of all the welfare ‘reform’ issues.

The social landlord will get blamed for this by tenants yet it is not social landlords fault and NOT informing social tenants of this NOW will massively damage the social tenant social landlord relationship.

Note well that above example is (a) a 3 bed property and (b) is for a 4 child family.  The impact is much worse if using a 4 bed property or a 5+ child family.  In that circumstance (4 bed house 5 child family) the tenant make-up goes from £100 pw in April 13 to £169pw in April 2020.  The £169 per week tenant make-up on a £184pw rent is a 92% HB cut and the bedroom tax pales into insignificance by comparison!

As I have said before larger families become a risk too far even for social housing as the likelihood of significant arrears is huge.  This I have called the fundamental flaw in the overall benefit cap and begs the question where the hell will large families live?  The OBC is a crude cap that creates the problem of the fundamental flaw yet has no answer to that pertinent question. That is another reason why the OBC with the systemic and fundamental flaw is a much bigger issue for social landlords than the bedroom tax or direct payment.

The 5 child family living in a 4 bed social housing property will get £464 per week in welfare benefits and £136 per week in HB, a total of £600pw up to March 13, yet the next month will get £464 pw in welfare benefit and just £36 pw in HB – a HB cut of 74% yet social landlords still focus on the ‘outrageous’ 25% maximum cut in HB the bedroom tax holds!

Let’s reduce the variables and see what happens to a 3 child family in a 3 bed social housing property in London.  In April 2013, this gives £324 in welfare benefits and £126 in rent, a total of £460 therefore full HB is paid.  By 2020 this becomes a cap of £555, welfare benefits of £377 and a rent of £171 a total of £548 pw and still below the cap.  Yet by the end of the next parliament in 2025 these become a cap of £597, welfare benefits of £421 and a rent of £210 – a shortfall of £34 per week which increases year on year.

By 2020/21 no 3 child family will get full rent paid by HB

By 2024/25 no 5 child family will get a penny in HB towards rent

By 2027/28 no 4 child family will get a penny in HB towards rent 

….all because of the OBC and the systemic flaw  

You still think the bedroom tax and direct payment are the biggest risk to rent arrears?

How many of the ‘welfare reform calculators’ you pat yourself on the back for developing and showing to tenants include the systemic flaw and the fundamental flaw?  You know the ones YOU are going to be blamed for by your tenant customers?  I haven’t seen one!

Does it need me to add 2 minutes to my workload so I can tell social landlords how long it will be before 3 child families wont get a penny in HB, or 2 child families for that matter.  As I have said before its a spreadsheet a 7 year old can create and work on in minutes.  So why havent social landlords seen this?  Why haven’t opposition MPs seen this?  Why is the CIH and NHF and other housing lobbies silent on the issue?  What about the CABx? Why haven’t tenants seen this and of course why hasnt central government seen this ….if indeed it hasnt already?  After all they are the ones that have developed this unbeliveably crude cap figure that will see families have nowhere to afford to live if on welfare benefits.

The OBC destroys social housing yet we dilly dally over the bedroom tax and direct payment!

UPDATE 17 OCTOBER 2012

QUESTIONS?

1. Will social landlords become more risk averse on allocating to larger families?
2. If Yes (which seems inevitable) what is the purpose of social housing if it cant accommodate?
3. Where will the evicted larger families go after temporary accommodation B&Bs?
4. As such families cant afford any accommodation will they have to remain in temporary accommodation perpetually?
5. If direct payment of HB to tenant adds a 5% risk of arrears, the bedroom tax 14% – 25% risk of arrears then what risk of arrears does the OBC give? [Clue: pick a number between 99 and 101]
6. Does the OBC create perpetual homelessness? [Rhetorical as answer is Yes!]

A social landlord will know that a family with 5 children will get no benefit (HB or its replacement housing payment in Universal Credit) in a few years time.  Both existing and new tenants are at high risk of arrears and arrears at a level that compel eviction and make it inevitable.  The social landlord also knows this will apply to 4 child families soon and shortly thereafter to 3 child families.

The PRS landlord now knows that larger families cannot afford to live in the PRS as even if they are working should they lose employment they simply cannot afford to remain and arrears will accrue rapidly.  NB: The VOA official stdy of 500,000 PRS rent levels in-payment last month found the average 3 bed PRS rent to be £176.67 per week.  The Smith family above (4 children) have a maximum HB / LHA benefit payment of £108pw meaning a £68 per week shortfall, or £612 by the time a S21 notice has expired and almost £900 by the time enforced and so the PRS landlord will serve such an eviction notice. A 3 child family may just have enough residual from the OBC to afford PRS accommodation in 2013, yet this becomes too much of a risk of arrears withing a couple of years and so the PRS stops accommodating 3 child families due to risk of arrears and so social housing becomes the only option thus increasing demand there.

Yet the same families increasingly become a risk of arrears option for social landlords, so where will they live?  The PRS housed 4 child and above families will be moved to TA B&Bs yet where is the move-on route from here? If they are too much a risk to be rehoused in the cheapest and most-affordable form of social housing just where will they go?  The same TA B&Bs will soon be joined by 3 child families from the PRS too, and just what is the capacity of TA B&Bs?  Or simply how soon will they be full?  Will this mean more intentionality ddecisions being made by councils to avoid TA huge cost is another factor at play too!

Look at this another way, just who can afford to live in a larger social housing property than a 3 bed?  So the OBC has a huge impact not only on allocations and nomination agreements with local councils but also on homeless legislation interpretation and of course development of new social housing.

Yet that still does not answer the question of where 4+ child families will live!

The ONLY option I can see is the take-up of national minimum wage or similar low-paid employment which then sees working tax credit kick in and thus exempt the family from the OBC.  In short work or dont have a roof over your head is the OBC message to families.  Yet even if they do work they still carry a huge risk of arrears and thus eviction and thus TA B&Bs again should they lose their employment.  The risk of arrears and perpetual homelessness with its unsuitable conditions, its added cost to the public purse and the highly damaging health aspects (and costs) never goes away for a large family.  The OBC permanently and perpetually punishes large families and pretty soon the systemic flaw in the OBC sees ‘large’ family by definition becoming a 3 child family in social housing – hardly ‘large!’

As I keep saying the OBC will have a far greater impact on social housing than the bedroom tax or direct payment to tenant of HB, yet both the fundamental flaw and the systemic flaw receive scant attention.  Why?

The impact the OBC will have on development or the interpretation of how a family is assessed as homeless (intentional or not?) each justify a full-length blog alone as do all the other impacts such as allocation, nomination agreements and the undoubtedly more risk-averse that social landlords will generally become.  The figures I have used above dont lie, yes they include assumptions on the varying inflation rates but rents (RPI) are always higher then welfare benefit increases at CPI, which in turn has increased higher than wage inflation over the last decade and looks set to continue given the parlous state of the economy with negative or zero growth.  The figures could be an underestimate too if wage inflation falls and RPI increases more, yet even if they do the systemic and fundamental flaws still remain in the back of a fag packet OBC policy.

I could be really cynical and say that as the social housing sector has fallen from delivering 3 in every 4 rented homes down to less than 1 in 2 over the last 30 years despite having the best product and best service at the best price so it is no surprise it hasnt seen the impact the OBC will have or the flaws within it.   Yet the OBC WILL have the biggest impact of any of the coalition welfare reforms on social housing and far more than the bedroom tax upon which the sector has stuck to like a limpet almost exclusively in ‘seeing’ the impact of all the welfare reforms on themselves and their tenants.  It’s time they took another look!

 

Aged 16 – 59? How does a further 15% cut in welfare benefits sound?

The Tory Party Conference this week and like all party conferences but especially the incumbent government party ones such conferences are often described or known as the silly season, and with good reason.  They are used often to espouse silly policies and more often than not internal wranglings in the politics of the party involved has greater priority than policy.  Yet that doesn’t excuse the housing media talking so much silly stuff, or quite frankly, crap, about the housing issues that emerge from them.

The under 25s will not get any Housing Benefit is a case in point.  When first raised in April 2012 I said this was a non-runner and gave a few examples why – it would close all DV refuges and all single homeless hostels and prevent the returning war soldier coming back from a term of duty in Afghanistan the right to live somewhere.  It was then re-raised by Cameron in a Telegraph article to which I restated all the above AND stated it was a non-runner gain BUT it was a smokescreen or kit-flying exercise to prepare for the real policy – making the shared accommodation rate or SAR apply to social housing as it does now to private rented housing.

I am now fully convinced of this for two reasons, cost and politically sensitivities.  In terms of cost once you exclude the 171,000 single parents, then the numbers of single hostel residents (14,000 or so) the number in a refuge (5000) the number of care leavers (13,000) or so and of course those under 25s that are working and having to claim HB to supplement their low pay (between 66,000 and 103,000 depending on which figures you believe) then out of the initial 383,650 under 25 and receiving housing benefit you have very few left to sanction.  In short the nearly £2bn per year saving that Cameron stated comes down to about £182m per year.  With the political flak that goes along with that, which would risk Joe Public turning against the entire welfare savings agenda, it is a non-runner.

By contrast all those single persons under 35 in the PRS already have the shared accommodation rate or SAR applied.  The whole issue of SAR applying caused consternation when I raised it initially back in January (here, here, here, here and all reference further posts) leading to a wide-ranging consensus in housing that it’s a case of when and not if it will apply,

If the coalition applied SAR to social housing it simply levels the playing field and is, and would be seen as, politically acceptable.

Why should we the government discriminate for the already taxpayer-funded sector….

Yes we can all see the arguments that would be used by this coalition to stifle any challenge!

We ‘subsidise’ them already and now they want special privileges too!

Yes you begin to get my point I think (and no I havent accepted a commission from Conservative Central Office!)

A quick calculation on my infamous £1 calculator (something that the coalition seemingly can’t afford or know how to use – do keep up reader!) would see applying the SAR to social housing save about £466m per year or about 2.5 times the amount the already diluted yet still embryonic banning HB to under 25s would realise.  That’s a no-brainer despite the horrendous consequences it will have.

It also shows the social housing sector who realise the mayhem this will cause in the SRS dont shout about the plight of under 35s in the PRS who receive a maximum SAR of as little as £47.06 per week in LHA in Stoke!) that bedroom tax is much higher than the SRS one and always has been but hey it only applies to young people….er!

We also had it confirmed this week that the chancellor will be seeking a further £10bn of welfare benefit cuts in the first two years after the next election. Not as many comments or blogs on this as you would think but the few around all say this means the banning of HB to under 25s will definitely happen!  They I maintain for the reasons above are wrong.

Yet the lack of comment on the additional £10bn of welfare benefit cuts is a huge concern for me.  Perhaps its just more of the same and we have become immune to such cuts?  If so, hopefully what I’m about to say will wake you out of that slumber –

The coalition is planning a further 15% cut in working-age welfare benefits!

To explain: Yesterday saw a National Audit Office report on the DWPs welfare benefit spend.  You know how young people always get the blame for welfare benefit spend (not just HB ban to under 25s) well it must come as a huge surprise reader that pensioners receive £3 out of every £5 the government spends on welfare benefits.  So when scratched under the surface we see about £95bn of the total welfare benefit spend go to pensioners and about £65bn per year go to working-age people.

To date pensioners have been excluded from welfare benefit cuts and future policies (Council Tax Benefit, Universal Credit and the Overall Benefit Cap to name but a few).  If that continues – and re-read my political sensitivity points above and remember 40%+ of the electorate are pensioners – the grey vote – which I fully expect it will and they will continue to be ‘immune’ from cuts, then the £10bn additional welfare benefit cuts, so long talked about but only confirmed this week, is £10bn from the £65bn per year that working-age people receive – a cut of 15.38% no less!

Reader, please don’t dwell over the weekend just what a further 15% cut to welfare benefits for working-age people will mean for you, your family, your friends or the economy or the country at large in so many other areas such as NHS, criminal justice costs, housing evictions, increased homelessness, increased homeless costs or even increased bile blaming all those on benefits in the Daily Mail…bugger…sorry!

.